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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST DECEMBER, 2010
(Expressed in Thousands of Trinidad and Tobago Dollars, except where otherwise stated)
(Continued)
2. Significant accounting policies (continued)
d) Business combinations and goodwill
Business combinations from 1 January 2010
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the
consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For
each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate
share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation
in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the
separation of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date through the consolidated income statement.
Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognized in accordance
with IAS 39 either in the consolidated income statement or as a change to other comprehensive income. If the contingent consideration
is classified as equity, it should not be remeasured until it is finally settled within equity.
Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized
for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair
value of the net assets of the subsidiary acquired, the difference is recognized in consolidated statement of income.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing,
goodwill acquired in a business combination is, from the acquisition date, allocated each of the Group’s cash-generating units that
are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those
units.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated
with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of
the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the
portion of the cash-generating unit retained.
Business combinations prior to 1 January 2010
In comparison to the above-mentioned requirements, the following differences applied:
Business combinations were accounted for using the purchase method. Transaction costs directly attributable to the acquisition formed
part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the proportionate
share of the acquiree’s identifiable net assets.
Business combinations achieved in stages were accounted for as separate steps. Any additional acquired share of interest did not affect
previously recognized goodwill.
When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree were not reassessed on
acquisition unless the business combination resulted in a change in the terms of the contract that significantly modified the cash flows
that otherwise would have been required under the contract.
Contingent consideration was recognized if, and only if, the Group had a present obligation, the economic outflow was more likely
than not and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration were recognized as part
of the goodwill.
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